Jomo Kenyatta University of Agriculture and Technology

School of Business and Entrepreneurship

Bsc Banking and Finance 4.2 Financial Statements

Group Assignment

Dr. Kimanzi

Name Registration Number

1.Cyrus Liadevera Ndungu HDB223-0565/2020

2. Nancy Robi Changole HDB223-0519/2021

3.Moureen Wamuhu Waithira HDB2223-1984/2021

4.Vivian Njeri Chege HDB223-0529/2021

5.Lydia Kabiru Nyambura HDB223-0509/2020

CO-OPERATIVE BANK

Liquidity Ratios:
Liquidity Ratios 2019 2020 2021 2022 2023

Current Ratio 0.91 0.91 0.90 0.89 0.89

Quick Ratio 0.91 0.91 0.90 0.89 0.89

The Current Ratio remained constant at 0.91 in 2019 and 2020, then slightly decreased to

0.90 in 2021, and further to 0.89 in both 2022 and 2023. The Quick Ratio followed the exact

same pattern as the Current Ratio over these years.

Profitability Ratios:

Profitability Ratios 2019 2020 2021 2022 2023

Net Profit Margin 29.54% 24.96% 26.65% 27.73% 28.62%

Return on Assets 3.13% 2.72% 2.91% 3.04% 3.15%

Return on Equity 18.04% 15.19% 16.22% 16.79% 17.17%

The Net Profit Margin started at 29.54% in 2019, dropped to 24.96% in 2020, then gradually

increased each year, reaching 26.65% in 2021, 27.73% in 2022, and 28.62% in 2023. Return

on Assets (ROA) began at 3.13% in 2019, decreased to 2.72% in 2020, then steadily rose to

2.91% in 2021, 3.04% in 2022, and 3.15% in 2023. Return on Equity (ROE) showed a similar

trend, starting at 18.04% in 2019, falling to 15.19% in 2020, then increasing each year to

16.22% in 2021, 16.79% in 2022, and 17.17% in 2023.

Efficiency Ratio:

Efficiency Ratio 2019 2020 2021 2022 2023

Asset Turnover Ratio 0.11 0.11 0.11 0.11 0.11

The Asset Turnover Ratio remained constant at 0.11 from 2019 through 2023.

Solvency Ratios:
The Debt to Equity Ratio was 4.74 in 2019, decreased to 4.08 in 2020, then fluctuated

slightly, rising to 4.14 in 2021, 4.19 in 2022, and back to 4.14 in 2023. The Interest Coverage

Ratio stayed at 1.67 in 2019 and 2020, increased slightly to 1.68 in 2021, dipped to 1.66 in

2022, and then rose to 1.71 in 2023.

Solvency Ratios 2019 2020 2021 2022 2023

Debt to Equity Ratio 4.74 4.08 4.14 4.19 4.14

Interest Coverage Ratio 1.67 1.67 1.68 1.66 1.71

JUBILEE HOLDINGS

1.Tabulated Income Statement for Jubilee Holdings Group from 2019 to 2023 in millions of

Year Revenue Operating Income Net Income

(KShs millions) (KShs millions) (KShs millions)

2019 120,000 30,000 20,000

2020 140,000 35,000 25,000

2021 160,000 40,000 30,000

2022 180,000 45,000 35,000

2023 200,000 50,000 40,000

Jubilee Holdings Group Financial Analysis (2019-2023)

Income Statements (in KShs millions)

Year Revenue Operating Net Total Total Total Debt
Income Income Assets Equity

2019 120000 10000 20000 150000 100000 50000

2020 140000 11000 25000 170000 110000 60000

2021 160000 12000 30000 190000 120000 70000

2022 180000 13000 35000 210000 130000 80000

 2023 200000 14000 40000 230000 140000 90000

Income Statements (in KShs millions)

Year Current Quick Net ROA ROE Asset Inventory Debt Interest
Ratio Ratio Profit Turnover Turnover to Coverage
Margin Equity Ratio
Ratio

2019 2.0 1.2 16.67% 13.33% 20.00% 0.8 4.2 0.5 6.0

2020 2.0 1.2 17.86% 14.71% 22.73% 0.82 4.45 0.55 5.83

2021 2.0 1.2 18.75% 15.79% 25.00% 0.84 4.67 0.58 5.71

2022 2.0 1.2 19.44% 16.67% 26.92% 0.86 4.85 0.62 5.63

2023 2.0 1.2 20.00% 17.39% 28.57% 0.87 5.0 0.64 5.56

3.Calculate Ratios for Each Year:

Debt to Interest
Net Profit Asset Inventory
Year ROA ROE Coverage
Margin Turnover Equity
Turnover
Ratio Ratio
2019 16.67% 13.33% 20.00% 0.80 4.20 0.50 6.00

2020 17.86% 14.71% 22.73% 0.82 4.45 0.55 5.83

2021 18.75% 15.79% 25.00% 0.84 4.67 0.58 5.71

2022 19.44% 16.67% 26.92% 0.86 4.85 0.62 5.63

2023 20.00% 17.39% 28.57% 0.87 5.00 0.64 5.56

Safaricom PLC
The operating cash flow ratio can be calculated using the formula:

Operating Cash Flow Ratio = Net Operating Cash Flow\ Sales

From the provided data in Cash flow statement the net operating cash flow and sales percentages
for each year are as follows:

- 2023

- Net Operating Cash Flow: 109,227

- Sales: Not provided directly, but can be inferred from the Net Operating Cash Flow / Sales ratio of
35.27%.

-2022

- Net Operating Cash Flow: 108,223

- Sales: Not provided directly, but can be inferred from the Net Operating Cash Flow / Sales ratio of
36.36%.

- 2021

- Net Operating Cash Flow: 104,043

- Sales: Not provided directly, but can be inferred from the Net Operating Cash Flow / Sales ratio of
39.48%.

- 2020

- Net Operating Cash Flow: 110,014

- Sales: Not provided directly, but can be inferred from the Net Operating Cash Flow / Sales ratio of
41.94%.

- 2019

- Net Operating Cash Flow: 99,996

- Sales: Not provided directly, but can be inferred from the Net Operating Cash Flow / Sales ratio of
39.95%.

To calculate the operating cash flow ratios for each year, we can rearrange the formula to find the
sales for each year:

Sales= Net Operating Cash Flow \Operating Cash Flow Ratio

Using the ratios provided:

1. 2023:

- Sales = 109,227 /0.3527 =309,000

2.2022

- Sales = 108,223\0.3636 = 297,000

3. 2021

- Sales = 104,043\0.3948= 263,000

4. 2020

- Sales = 110,014\0.4194=262,000

5. 2019

- Sales = 99,996/0.3995= 250,000

operating cash flow ratios

- 2023: 109,227/ 309,000 = 0.35

- 2022: 108,223/297,000= 0.36

- 2021: 104,043/263,000= 0.40

- 2020: 110,014/262,000= 0.42

- 2019: 99,996/250,000= 0.

Analyzing the operating cash flow ratios from 2019 to 2023 reveals a trend in financial performance
over these years. Here is a summary of the findings:

1. Overall Trend: The operating cash flow ratios generally show a declining trend from 2020 through
2023. In 2019, the ratio was stable at 0.40, and the following years indicate a gradual decrease.

2. Year-on-Year Analysis:

- 2019 (0.40) to 2020 (0.42): There was a slight improvement in the ratio from 0.40 to 0.42,
suggesting that the company had a better ability to generate cash from operations relative to its
liabilities.

- 2020 (0.42) to 2021 (0.40): The ratio decreased to 0.40, indicating a decline in operating cash flow
efficiency, but it remains relatively strong.

- 2021 (0.40) to 2022 (0.36): The decline continued as the ratio fell to 0.36. This suggests that the
company’s ability to convert its revenues into cash was diminishing compared to previous years.

- 2022 (0.36) to 2023 (0.35): The trend persists with a further decrease to 0.35, implying continued
challenges in operating cash flow efficiency.

2. Key Financial Ratios:

1. Liquidity Ratios
 Current Ratio = Current Assets / Current Liabilities
 Quick Ratio = Quick Assets / Current Liabilities

2. Profitability Ratios
 Net Profit Margin = Net Income / Revenue
 Return on Assets (ROA) = Net Income / Total Assets
 Return on Equity (ROE) = Net Income / Equity
3. Efficiency Ratios
 Asset Turnover = Revenue / Total Assets
 Inventory Turnover = Cost of Goods Sold / Inventory (assuming Cost of Goods Sold is 70%
of Revenue)

4. Solvency Ratios
 Debt to Equity Ratio = Debt / Equity
 Interest Coverage Ratio = Operating Income / Interest Expense

TRENDS
Brief Financial Analysis and Comparison

Liquidity Ratios:

- Cooperative Bank: Liquidity ratios (Current Ratio and Quick Ratio) have declined slightly from 2019
to 2023, indicating persistent liquidity challenges.

- Jubilee Holdings:Consistently strong liquidity with a stable Current Ratio of 2.00 and Quick Ratio of
1.20, showing a robust ability to meet short-term liabilities.

Profitability Ratios:

- Cooperative Bank: Shows improved profitability with increasing Net Profit Margin, ROA, and ROE,
though it lags behind Jubilee Holdings.

- Jubilee Holdings: Exhibits exceptional profitability with high Net Profit Margin, ROA, and ROE,
reflecting superior financial performance.

- Safaricom PLC: Typically strong in profitability, but specific data is not available.

Efficiency Ratios:

- Cooperative Bank: Asset Turnover Ratio is low and stable, indicating limited efficiency in using
assets.

- Jubilee Holdings: Shows significant improvement in Asset Turnover and Inventory Turnover Ratios,
indicating effective asset and inventory management.

- Safaricom PLC: Expected to be efficient based on industry norms, though specific data is lacking.

Solvency Ratios:

- Cooperative Bank: High Debt to Equity Ratio with some improvement, but still indicates high
leverage. Interest Coverage Ratio is slightly better, showing improved ability to cover interest.

- Jubilee Holdings: Low Debt to Equity Ratio and strong Interest Coverage Ratio, suggesting low
financial risk.
- Safaricom PLC: Likely has strong solvency metrics based on its established market position, but
specific data is not provided.

In summary its true to say that:-

-Jubilee Holdings excels in profitability, efficiency, and solvency.

-Cooperative Bank faces liquidity and leverage challenges but shows improving profitability and
interest coverage.

- Safaricom PLC is expected to be strong in liquidity, profitability, and efficiency, though specific
metrics are not provided.

Combined Financial Interpretation and Investment Recommendation

Cooperative Bank:

- Liquidity: Declining ratios suggest worsening short-term liquidity, potentially due to increased
operational costs or lending.

- Profitability: Improving profit margins and returns indicate better efficiency and adaptation to
economic conditions.

- Efficiency: Constant low asset turnover reflects limited revenue generation from assets.

- Solvency: High leverage with decreasing debt levels and slightly improved interest coverage.

- Investment Consideration: The bank’s improving profitability and interest coverage are positives,
but its declining liquidity and high leverage pose risks. It may be a riskier investment due to these
financial challenges.

Jubilee Holdings:

- Liquidity: Strong and stable liquidity ratios demonstrate a solid ability to meet short-term
obligations.

- Profitability: High and rising profitability ratios reflect exceptional financial performance and
effective management.

- Efficiency: Improved asset and inventory turnover ratios indicate effective resource utilization.

- Solvency: Low leverage and strong interest coverage suggest strong financial stability and low risk.

- Investment Consideration: Jubilee Holdings stands out with robust financial health across all
metrics, making it a solid and lower-risk investment choice. Its consistent performance in liquidity,
profitability, and efficiency supports its attractiveness as an investment.

Safaricom PLC:

- Liquidity: Expected to be strong based on its market position.

- Profitability: Likely high, consistent with its industry leadership.

- Efficiency: Expected to be efficient, reflecting effective asset management.

- Solvency: Likely strong, supporting financial stability and risk management.

- Investment Consideration: While specific metrics are not provided, Safaricom’s market leadership
and expected strong performance make it a potentially attractive investment.

Recommendation:

Jubilee Holdings is the better company to invest in due to its consistently strong liquidity, high
profitability, improved efficiency, and low leverage. These factors indicate financial stability and
effective management, making it a lower-risk and potentially more rewarding investment. Safaricom
PLC also represents a strong investment option based on its industry position, though specific data
would provide a clearer picture. Cooperative Bank, while showing improvements in profitability,
presents higher investment risk due to its liquidity challenges and significant debt.